How to Best Manage Multi-Channel Conflict (With Examples)
It’s important to take advantage of the various sales channels that can help spread your brand. However, diversifying your channels may also increase the likelihood of channel conflict. Channel friction can come in the form of price differentiation, territory encroachment, and promotional conflict, among others.
If your business sells its products or services through various marketing channels, it’s important that you understand the different types of channel conflicts. By understanding types of multi-channel conflict examples, you can take the necessary steps to prevent it. Read on to find out more about channel conflict.
What is Channel Conflict?
Channel conflict occurs when there is discord, difference, or disagreement between two or more partners. When one partner’s operation or activities affect the sales, market share, profitability, or goal accomplishment of the other channel partner, there will be a conflict.
Channel conflict often arises when the same brand offers identical products through multiple distribution channels.
For example, when a manufacturer (brand) intermediates its channel partner such as wholesaler, retailer, and sales representatives by selling their product or services directly to the consumer.
Types of Channel Conflict
Channel conflict can manifest in various forms. To manage and prevent multi-channel conflict, you need to understand its different types. There are three common types of channel conflicts: vertical and horizontal channel conflict, and multi-channel conflict. Let’s look at how these conflicts differ:
Vertical Channel Conflict
Vertical channel conflict occurs between two or more partners at different levels of the same distribution channel. This conflict often causes direct competition between the distribution channels involved.
A typical example of vertical channel conflict could be a disagreement about price between provider and reseller of a SaaS.
Horizontal Channel Conflict
Horizontal channel conflict, the most common conflict, occurs between partners on the same level of a distribution channel. This tends to focus on competition over leads and customers, overlapping sales networks, and channel saturation.
A perfect example of horizontal channel conflict is between resellers. The channel partners may be of different territories but can have a conflict about the pricing or manufacturer’s biases.
Multi-channel conflict arises when a manufacturer takes advantage of multiple distribution channels to sell the same products and services.
For example, if the same product is available on a retailer’s eCommerce store as well as a brick-and-mortar store at different price points, multi-channel conflict will arise.
Examples of Multi-Channel Conflict
In 2007, Apple faced multi-channel conflict because it had too many retail stores. During this period, Apple reported a 33% yearly growth in retail outlets. Because of the oversaturation of Apple stores, customers patronized Apple’s official retail stores more than other establishments that sold Apple products.
This caused a channel conflict between store owners and Apple. Further conflict was created when Apple decided to sell iPhones only at AT&T, online, or Apple Stores, and Macs directly to educational institutions.
Samsung experienced channel conflict in India in 2014 because it sold its product through multiple channels: both online and at brick-and-mortar stores. While this strategy isn’t normally an issue, the conflict arose when Samsung eCommerce stores offered a higher discount than the physical stores thus affecting their sales.
This caused many distributors to distance themselves from Samsung products. This was later resolved when Samsung decided to sell about 48 of its models exclusively through offline distributors.
Develop a Plan to Manage Multi-Channel Conflict
Any of these types of multi-channel conflict can cause a lot of problems for a business. This is why it’s important to develop a plan to prevent and mitigate the negative effects, should they arise. The steps below can help you develop a plan to manage channel conflict that will ultimately keep all stakeholders happy.
Step 1: Make a Realistic Assessment
When orchestrating an expansion or a campaign, make sure you are realistic about the planning. Always consider the risks and the opportunities that may arise from making such a decision.
Step 2: Communicate With Distributors and Partners Effectively
Clearly communicating plans with your partners is key to its success. Discuss your goals, how you intend to implement them, how you will measure them, and so on.
Step 3: Welcome Feedback From Your Partners
After you share your goals and vision for an expansion with your partners, be ready to accept their criticism and feedback. Some partners may be nervous about the potential competition. Develop a plan to ease such concerns ahead of time.
Step 4: Create Joint Promotion and Campaigns
Lastly, after considering your plans and the concerns of your partners, develop a joint promotion and campaign that benefits all parties involved. This will help develop a sense of partnership across the channel.
Turning Multi-Channel Conflict Into a Positive Situation
If you find yourself in a multi-channel conflict as your business expands, there are a couple of things you can do to turn the negative situation into a positive one.
Firstly, consider assigning distinct territorial boundaries to eliminate geographical competition. You can also consider assigning a particular product or service within your brand to a specific channel. This will help to minimize competition.
Internally, you can ensure that your team learns how to manage the various channels you have in place. Exchanging employees between different channel levels can help prevent conflict in the sense that it gives them an understanding of the operation and roles at other levels in the distribution channel.
Managing Your Channel Conflicts in an Effective Way
Channel conflict is a pitfall that can affect the growth and evolution of any business. Having the right plans in place will help minimize this pitfall.
If you don’t know how to manage channel conflict yourself, it may be beneficial to hire a Partner Manager.
Whether or not this is a viable option at this point in your business, a Partner Relationship Manager (PRM) Software can be a welcomed tool to avoid channel conflict. Kiflo includes tools, as well as a team of experts, that help ensure your partners are effectively managed.